Barclays upgrades British Land to “overweight,” sees 20% upside

Investing.com -- Barclays upgraded British Land to “overweight” from “equal weight” rating on Tuesday, lifting its price target to 465 pence from 450 pence against a May 21 close of 388 pence, implying around 20% upside, as the landlord returns to earnings growth after three years of broadly flat results.

British Land trades at around 12.5 times fiscal year 2027 estimated earnings, equivalent to an 8% EPS yield.

Barclays raised its five-year EPS CAGR estimate to 4.5% from 3.7%, forecasting recurring EPS rising from 29 pence in fiscal year 2026 to 31.1 pence in fiscal year 2027, 32.7 pence in fiscal year 2028 and 34.1 pence in fiscal year 2029.

The company has guided for at least 6% earnings growth in fiscal year 2027 and a medium-term target of 3% to 6% per annum. "This is not an NAV story; it is an income and income-growth story," the analysts said.

Barclays simultaneously reiterated “overweight” on Landsec, raising its target to 780 pence from 770 pence against a 618 pence close, implying 26% upside.

Landsec trades at around 12 times fiscal year 2027 earnings, or an 8.3% EPS yield, with Barclays modelling EPS reaching 62.1 pence by fiscal year 2030, in line with management’s approximately 62 pence target, per the note.

The brokerage said the current earnings cycle is higher quality than the last. From fiscal year 2014 to fiscal year 2019, £97 million of Landsec’s £127 million recurring earnings increase came from lower finance costs.

For British Land, £50 million of its £93 million fiscal year 2015 to fiscal year 2018 earnings rise came from the same tailwind.

Barclays now forecasts British Land’s £81 million earnings growth from fiscal year 2026 to fiscal year 2031 driven by £189 million of gross rental income growth, offset by £114 million of higher finance expenses.

British Land’s campus portfolio secured £143 million of headline rent and 1.7 million square feet of deals in fiscal year 2026, with like-for-like net rental growth of 12% and occupancy at approximately 95%.

Landsec’s office portfolio delivered 6% like-for-like income growth, with occupancy at a decade-high of 98.6%.

On retail, British Land’s parks were 99.1% occupied with leases signed 9% ahead of ERV, while Landsec signed £36 million of rent at 10% above ERV across 250 lettings, up 24% year-on-year.

British Land ended fiscal year 2026 at 9.2 times net debt to EBITDA, with Barclays forecasting a reduction to 7.3 times. Landsec stood at 8.7 times on Barclays’ calculation, forecast to fall to 6.9 times by fiscal year 2029.

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